(LEGAL) Performance Royalties: The State Of Play

8-1-2014

There is much afoot these days in the world of copyrights and performance rights and royalties. Any radio station owner knows about the license fees collected by ASCAP, BMI, and SESAC, which pay royalties to composers and publishers. Less familiar are royalties collected by performers and the recording industry. For musical recordings, radio stations pay SoundExchange when streaming music over the Internet, but not for over-the-air broadcasts. The logic has been that the recording industry already reaps a huge benefit from having its records played over the air. In fact, traditionally the money stream has flowed in the opposite direction, with radio stations, DJs, and PDs being paid to play recordings on the air. There?s even a name for it: payola.

Performance Tax
The term ?performance tax? is used for the perennial attempt to impose, through legislation, a requirement that radio stations pay royalties for over the-air broadcasts of musical recordings. Through the years these attempts have been thwarted, and even now there are already 224 U.S. representatives co-sponsoring a resolution against it.

But this year there appears to be additional momentum for the performance tax. The House Subcommittee on Intellectual Property held hearings on music licensing, and Rep. Jerrold Nadler, ranking member of the subcommittee, said, ?I am developing legislation to address the various problems in existing law in one unified bill.? He went on to say that the most glaring problem is that ?rights holders of sound recordings receive absolutely no compensation when their music is played over the air on terrestrial, meaning AM/FM, radio.?

With an introduction like that, it sounds more like a witch hunt than a hearing. However, there appears to be a new tactic, namely a top-to bottom review of the copyright laws (rather than just the singular issue of radio paying to air recordings). Although broadcasters still appear to have the votes in Congress, others quietly worry that a radio performance fee is just a matter of time.

Songwriter Equity Act
Even before the Congressional hearings in June, there was a House bill attracting attention ? the Songwriter Equity Act. This legislation charges the Copyright Royalty Board with setting fair songwriter (ASCAP and BMI) royalty rates for digital music services by broadening the pool of evidence that rate courts like the CRB may examine. At first, this sounds like a money grab by composers and publishers against Internet streamers like Pandora, but it could open the door for the CRB to adjust any perceived inequities between songwriter and artist rates on the backs of broadcasters.

Geofencing
Although radio stations do not currently have to pay performance fees for recordings broadcast over the airwaves, they do pay for simulcasts of the station?s programming over the Internet. This goes back to passage of the Digital Millennium Copyright Act in 1998, when there was debate over the royalty radio broadcasters should pay for streaming their content. The DCMA provided that any retransmission of a broadcast signal was exempt from the sound recording copyright royalty, provided that the broadcast is not ?retransmitted more than a radius of 150 miles from the site of the radio broadcast transmitter.?

Broadcasters argued that the exemption extended to retransmissions over the Internet. The recording industry argued that ?transmission? must be a terrestrial broadcast (like a translator) and cannot include streams, which have a global reach well beyond the 150-mile radius. In its final ruling, the Copyright Office determined that Internet simulcasts are not exempt from copyright liability.

However, this year a radio group filed a declaratory judgment complaint in federal court, claiming they use a technology called ?geofencing? to restrict Internet retransmissions of their broadcast signals to a 150-mile radius, and therefore they should be exempt from streaming royalties. A favorable ruling would provide precedent for other stations that seek only a local audience for their Internet streams, but could impact aggregators like iHeartRadio because some stations would then want to restrict the radius of their streams.

What can you do about the increased pressure being applied for new licensing fees? Station owners should reach out their counsel and the NAB, but also to the Radio Music Licensing Committee and to their state broadcast associations for information and ways to have their voices heard. Radio is a vital medium that serves the public in ways no other service does. Lawmakers need to be constantly reminded of that. And as broadcasters increasingly look to stream their content on the Internet and streaming companies like Pandora are moved to purchase radio stations to become more like broadcasters for copyright reasons, the lines will continue to blur. So it?s up to the radio industry to keep the message clear.

Frank Montero is the managing partner of the Washington, DC law firm of Fletcher, Heald & Hildreth and can be reached at montero@fhhlaw.com.

(8/1/2014 10:57:18 AM)
"Lawmakers need to be constantly reminded of that'.
Let's face it - money wins in Washington and in most other places too. But especially in Washington. So the money grab by the labels is being preceded by a money grab by lobbyist and lawmakers. So to win, this is going to cost us a lot of money for lobbyists. The only reminder our lawmakers need is a check.

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State Farm Exec Coming To Radio Show

9-5-13

The Radio Advertising Bureau and the National Association of Broadcasters announced today that executives from State Farm and OMD will participate in a Q&A at the 2013 Radio Show Advertiser Luncheon. State Farm is a big radio advertiser. RAB President and CEO Erica Farber will moderate a discussion with Assistant Vice President of Marketing at State Farm Tim Van Hoof (pictured) and Sumeet Kanwar, managing director, Midwest & strategy for OMD, State Farm's media planning and buying agency partner. This event, along with the Radio Ink Radio Wayne Awards Presentation, will be held September 18 at the Rosen Shingle Creek in Orlando.

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What If Penn State Happened to You?

by Ed Ryan

It'll be interesting to see how the PPM treats sports stations during the month of November. Speaking for myself I have never listened to as much sports radio as I have since this story was first reported. The nightmare unraveling day-by-day at Penn State has me tuning into ESPN radio the minute I wake up, and listening to any news or sports station that has a live stream and is talking about the topic.

Someone forwarded me this clip from Entercom's WEEI in Boston yesterday and I had to listen to it right away. I'm sure there are many like me, who want to hear more. It's partly because this is so unbelievable. I think we are all waiting for someone to say this never happened or for a real explanation. Yet, every day it just seems to get worse. We took this topic, altered it a bit, and threw it at attorney John Garziglia. Here's the scenario and here's John's answer.

Radio Ink asks:  You've just been hired. You are the night guy. You need the money. You hear something in the GM's office that you know isn't right. The only 3 cars outside the building are yours, the married (male) GM and the 16 year old station Intern. What do you do?

John Garziglia says:

This is a tough position for a new hire to be - witnessing or having knowledge of a possible felony taking place by management on the premises of your new employer.  First of all, it depends upon what the employee believes is not ?right?.  The question states that the new employee hears something he or she knows ?isn?t right?.  If the new employee hears or witnesses a situation in which someone is in imminent danger, that is what calling 9-1-1 is for.  That is an easy situation. 

The more difficult situation is that of what is painfully being played out in the news media this week with regard to Penn State ? that of the possible child molester with a willing victim.  The thoughts that will go through a new hire?s mind will range from ?it?s not my business ? I want to keep my new job? to wanting to do the right thing. 

To delve deeper into the Radio Ink question, I consulted noted white collar criminal defense attorney Kurt Stakeman at my law firm. 

Kurt notes that the first question is the age of a ?minor? or ?child? in the particular state.  Generally, states criminalize sexual contact between an adult and a minor.  That prohibition can be very broad and include any contact or act for a lustful purpose by the adult.  In some states there is an age limitation such as the adult must be five years older than the minor.  Thus, what the GM might be doing might or might not be against the law.

Kurt says that the second question is the duty to report.  The general rule is that a citizen has no duty to report a crime.  But, there is an exception for crimes against children.  Many states have a mandatory reporting law that requires someone with knowledge of sexual abuse of a child to report that information to the police (or in some states to the social services department).  Some states make reporting mandatory only if the witness is in a position of authority or custody of the child.  Failure to report unlawful sexual activity involving a child may well be a crime.

Kurt warns that, just to be clear, there is a distinction between a duty to report and a duty to respond truthfully to police if asked about a crime.  Even if your state does not mandate reporting, it could well be illegal not to tell the truth when asked by police about sexual activity involving a child.

Kurt states that scenarios like the one presented ?are a perfect example of the usefulness of an anonymous corporate hotline to the president, general counsel or human resources head.?  This Radio Ink situation presents a close question on whether there is sufficient evidence to call the police.  A credible corporate hotline would give the employee somewhere to turn.

There is also, of course, the ?angry father with a shotgun? issue but that is a practical and not legal problem.  And, there is the FCC perspective.  The FCC has saved a special place in its enforcement activities for convicted child molesters as to whether a convicted individual is qualified to be the licensee of broadcast stations, revoking the five Missouri radio station licenses of a convicted child molester some ten years ago.  Sadly, even a former FCC commissioner appointed in 1982 was later convicted of sexually assaulting a neighborhood boy. 

The issues presented by knowing of a possible child molestation also illustrate one more important thing.  Any person at any time can, as a witness to a crime or otherwise, have an immediate need for advice from a good criminal defense attorney.  It makes sense to have the phone number of such an attorney handy, hoping that you will never need it.  Good criminal defense attorneys absolutely welcome a call on issues like this one, not because they can charge you hundreds of dollars (they usually will not), but because they know that you, or someone you know, sometime in your life will likely need his or her services for the big one.  As described above, whether or not the police or a corporate hotline should be called, or nothing done at all because such an assignation, while perhaps unwise, is legal in your state, is something that is ultimately a matter of the law in each state.  While this makes life complicated, it is also the nature of our criminal justice system which has largely left what is and is not criminal behavior to the discretion of each state. 

John F. Garziglia is a Communications Law Attorney with Womble Carlyle Sandridge & Rice in Washington, DC and can be reached at (202) 857-4455 or jgarziglia@wcsr.com. Have a question for our "Ask The Attorney" feature? Send to edryan@radioink.com.

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Finebaum Case Sent Back to State Court.

Attorneys for syndicated sports-talker host Paul Finebaum have won their battle to have the case heard in state court. Finebaum filed a lawsuit against Citadel when they still owned the station he's working on in Birmingham. The order was signed by United States District Judge Scott Cooglar.

The Birmingham Business Journal is reporting that Finebaum?s attorneys plan to target WJOX-FM General Manager Bill Thomas and drop other defendants. Thomas has told Radio Ink that he considers Finebaum a friend and expects he'll continue to honor his contract.

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Finebaum VS. Citadel. Back to State Court. Sort of.

The very public fight Birmingham sports talker Paul Finebaum is having with his employer (which technically is Cumulus now) is moving back to state court. Yesterday a judge granted Finebaum?s motion to send the case back to state court which is where Finebaum's suit was initially filed. It's also widely believed Finebaum has a better chance to win in state court. The judge wrote "Citadel had failed to show the matter in dispute exceeded $75,000." $75K is the threshold for cases to move to the feds.
According to the Birmingham Business Journal, the judge also denied a motion to dismiss a similar suit that Finebaum?s attorneys had attempted to squelch in state court before its removal to federal court, writing that Finebaum?s legal team had failed to effect the dismissal before its removal. The ruling means Finebaum effectively has two lawsuits pending against his employer ? one in state court and one in federal court. However, Coogler noted in his opinion that the federal court would also remand the remaining case back to state court if the plaintiff adds claims made in the other suit.
Finebaum is suing Citadel, alleging they violated his employment contract by agreeing to federal bankruptcy reorganization without his prior consent. He also alleges that he was coerced into signing an unfavorable employment contract when Citadel officials threatened to pull his show from the air if he refused and that Citadel officials worked fraudulently to suppress his pay. The company has denied the claims.

Great coverage on the story by Birmingham Business Journal reporter Evan Belanger
Read the entire Business Journal piece HERE

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